AC brand enters US, 50 more on tap
09 DECEMBER 2014 8:25 AM
Marriott’s AC Hotels brand has made its initial entry to the United States market in New Orleans. President and CEO Arne Sorenson said many more U.S. markets will follow.
NEW ORLEANS—Marriott International’s AC Hotels brand has landed in the United States for the first time. And it looks like the brand intends to settle into its new home.
The brand’s executives, along with officials from owner and operator NewcrestImage, celebrated the launch of the AC Hotels brand in the U.S. Monday during a ceremony welcoming the 220-room AC Hotel Bourbon/French Quarter Area. During an interview with Hotel News Now prior to the ceremony, Marriott’s president and CEO Arne Sorenson said the brand has 50 development deals signed with owners across the U.S. Dozens more agreements are in the works beyond that. Other markets ripe for AC Hotels development in the U.S. include Charlotte, North Carolina, and the Midwest.
“There are so many I can’t name them all,” Sorenson said.
He said it was approximately 18 months ago that the global hotel powerhouse decided to import the brand to the U.S. Marriott formed a joint-venture partnership with Spanish hotel group AC Hotels in 2011 to launch AC Hotels by Marriott. There are 80 AC properties in Marriott’s portfolio at present.
In the U.S., Sorenson said AC Hotels will target urban centers, though not necessarily major gateways such as New York City and Los Angeles. New Orleans is the perfect example of the type of market that will help the brand win in the U.S., he said.
Sorenson said the brand will look to port its chic European stylings to the U.S. “There’s a European flavor to the product compared to what we have in the U.S.,” he said.
There are opportunities to bring the AC Hotels flag to other new global markets as well, Sorenson said, including Asia.
“It will be interesting to see what we can do in Asia,” he said. “We expect AC will be a global brand.”
The New Orleans opening is a bit of an outlier compared to the other planned AC Hotels in Marriott’s pipeline. The AC New Orleans is located inside the historic Old New Orleans Cotton Exchange and Security Homestead Association buildings.
Most of the brand’s future AC hotels will be new construction, Sorenson said. Only one of the 50 signed agreements Marriott has in place for AC Hotels is a true conversion, he said.
“We’re still at the state of the development cycle where development is ramping up,” Sorenson said. “We’re seeing folks who see hotel performance continue to improve” and want to get in the game. The low cost of debt also is encouraging new construction starts, he added.
Despite the uptick in supply, Sorenson said he remains largely optimistic that hotel performance overall will continue to improve.
“We still see supply growth at lower than the multi-decades average,” he said. According to data compiled by STR, parent company of HNN, year-to-date supply growth in the U.S. through October is up 0.8%.
Sorenson said it’s not supply that will likely upset this hotel cycle, but rather a demand shock elsewhere. “It’s about the economy,” he said. “And the U.S. economy has been performing quite well.”
The AC Hotels brand, with its focus on lively public spaces and guestrooms that lack closets, is designed for those who hold a millennial mindset, but not necessarily for millennials, Sorenson said.
AC properties also don’t depend on an in-house restaurant, where owners often struggle to make money, Sorenson said. The hotels will be located in hip areas of cities near existing popular restaurants, where guests already will migrate toward. It doesn’t make sense to try to compete with these eateries, he said.
“Of course, is the obvious answer,” Sorenson said, when asked whether the brand caters to millennials. “It’s interesting. With all the talk about millennials, essentially it’s just generational shorthand to describe a mindset.”
He added: “I think it’s the future.”